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World Bank Carbon Finance Bangladesh April, 2008 Chris Warner & Arun Banerjee World Bank

World Bank Carbon Finance Bangladesh April, 2008 Chris Warner & Arun Banerjee World Bank. Outline of Presentation. Bank carbon finance project cycle Bank carbon program Bangladesh and Bank carbon finance. Bank Carbon Finance Project Cycle.

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World Bank Carbon Finance Bangladesh April, 2008 Chris Warner & Arun Banerjee World Bank

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  1. World Bank Carbon Finance Bangladesh April, 2008 Chris Warner & Arun Banerjee World Bank

  2. Outline of Presentation • Bank carbon finance project cycle • Bank carbon program • Bangladesh and Bank carbon finance

  3. Bank Carbon Finance Project Cycle

  4. PIN development, approval and signing of Letter of Intent PIN Development and Letter of Intent • PIN developed and reviewed by Bank and approved • Bank and project sponsor sign a Letter of Intent which releases project prep funds Project completion 3 months Periodic verification & certification Negotiation of Project Agreements Construction and start up

  5. Prepare the Project Design Document and Bank due diligence Project completion Preparation and review of the Project Project Design Document and Bank review • Project Design Document prepared (a. Determine whether existing methodology is applicable • b. may require baseline study) • 2. Monitoring Plan prepared • 3. Bank begins technical, financial, environmental and social due diligence Periodic verification & certification 3 - 4 months Construction and start up

  6. Validation Process Project completion Preparation and review of the Project 3 months Carbon Asset Due Diligence Periodic verification & certification 3 - 4 months Validation process 1. Bank contracts the Independent Validator 2. Validator studies project design document, including baseline study and monitoring plan where applicable 3. Documents are posted for 30-day comment period 4. Validator issues a report and opinion 5. Registration request is submitted to the Executive Board (can be after the ERPA signature) 3-4 months Construction and start up Negotiation of Project Agreements

  7. Negotiation of Project Agreement (ERPA) Project completion Preparation and review of the Project 3 Carbon Asset Due Diligence 2 Periodic verification & certification Validation process Construction and start up 1-2 months Negotiation of Project Agreement Project Registration 1. Bank prepares term sheets and draft ERPA and negotiations initiated. 2. Project Due Diligence is completed and World Bank internal approvals are secured. 3. Letter of Approval obtained from Host Country 4. ERPA is signed

  8. Project registration by Executive Board Project completion Preparation and review of the Project Carbon Asset Due Diligence Periodic verification & certification Validation process 1-3 years Negotiation of Project Agreements Project Registration • Executive Board reviews the Validation Report • Executive Board registers the project

  9. Project Construction and ER Generation Project completion Preparation and review of the Project Carbon Asset Due Diligence Periodic verification & certification Validation process 1-3 years Project Construction and ER generation Negotiation of Project Agreements 1. At construction completion, Bank contracts Independent Verifier 2. Verifier checks that specifications of the monitoring plan are met (“Initial Verification”) 3. Project implementation starts 4. Project entity monitors in accordance to the monitoring plan

  10. Verification and Certification Project completion Preparation and review of the Project 3 Baseline Study and Monitoring Plan (MP) Up to 21 years Periodic verification & certification 1. Verifier issues periodic verification report 2. Bank pays project sponsor for ERs 3. Certified ERs are issued by the CDM Exec. Board 4. Verification undertaken annually or as deemed appropriate Validation process Negotiation of Project Agreements Construction and start up

  11. Project Completion Project completion Preparation and review of the Project • Crediting period either • 10 years fixed or • 7 year renewable (maximum 21 years) Up to 21 years Carbon Asset Due Diligence Periodic verification & certification Validation process Construction and start up Negotiation of Project Agreements

  12. Questions, What problems and issues do you forsee ?

  13. World Bank Carbon Program

  14. Technology $ Finance CO Equivalent CO Equivalent 2 2 Emission Reductions Emission Reductions Bank is the Trustee of carbon funds Technology $ Finance Industrialized Governments and Companies Developing Countries/ Economies in Transition Bank Managed Carbon Funds (Trust funds)

  15. World Bank Carbon Funds & FacilitiesTotal funds pledged: US$ 2.19 billion (16 governments, 66 firms) Prototype Carbon Fund: $180 million (closed). Multi-shareholder. Multi-purpose. Netherlands Clean Development Mechanism Facility: € 220 (closed). Netherlands Ministry of Environment. CDM energy, infrastructure and industry projects. Community Development Carbon Fund: $128.6 million (closed). Multi-shareholder. Small-scale CDM energy projects. BioCarbon Fund: $91.9 million (Tranche One closed totaling $53.8 million). Multi-shareholder. CDM and JI LULUCF projects. Italian Carbon Fund: $155.6 million (closed). Multi-shareholder (from Italy only). Multipurpose. Netherlands European Carbon Facility: € 51.6 (closed). Netherlands Ministry of Economic affairs. JI projects. Spanish Carbon Fund: € 220 million (closed). Multi-shareholder (from Spain only). Multipurpose. Danish Carbon Fund: € 58 million (closed). Multi-shareholder (from Denmark only). Multipurpose. Umbrella Carbon Facility: $737.6 million (Tranche One closed). 2 HFC-23 projects in China. Carbon Fund for Europe: € 50.00 million. Multi-shareholder. Multi-purpose.

  16. The Bank and carbon finance • 75 projects registered with the Executive Board. This is the third largest number of registered projects of any organization • 102 emission reduction purchase agreements signed • 207 million tCO2e committed in signed emission reduction purchase agreements with options on several million tons • Another 90 projects under active preparation • 29 ERPAs signed in East Asia and South East Asia • Executive Board has approved 24 Bank methodologies (over 27% of all methodologies)

  17. Bank’s Carbon Funds’ Portfolio Existing Carbon Funds Investible Capital: $2.2 bill. Committed Capital: $1.6 bill. Market share (project based):17% (2002-06) 5% (2006) • New Initiatives • Carbon Partnership Facility:First Tranche = € 350 million • Estimated date of operation: September 2008 • Forest Carbon Partnership Facility: $300 million • Estimated date of operation: June 2008

  18. Bangladesh carbon finance opportunities

  19. Bangladesh: carbon finance setting • Carbon Finance opportunities reflect the size, and structure the economy, infrastructure status and household incomes • 150 million inhabitants (75% rural) • 6 municipal corporations (18 million inhabitants) • 63% of population employed in agriculture • Per capita GDP: $1400 (purchasing power parity) • Main resources are arable land, natural gas (some coal), timber, • Power (± 5,000MW installed): mostly gas; major power shortages

  20. Bangladesh: key carbon finance opportunities • Rural household power: • solar home systems*, biogas and cooking stoves • Rural power: rice husk • Urban: demand side management (energy efficient lighting*) • Brick making: more energy efficient technologies* • Gas leakage avoidance ? • Municipal solid waste: composting and landfill gas methane capture Most carbon finance opportunities will be small and need to be bundled together or developed through programs

  21. Bangladesh Solar Home Systems program • Install 1 million solar home systems • IDCOL (192,000 CERs) and Grameen (372,000 CERs) are the lead implementing agents • Purchase period 2008 to 2013 • ERPA signed, December 2007 • Projects under validation

  22. End WWW.carbonfinance.org http://unfccc.int/2860.php

  23. Developing country/economy in transition with no emissions cap Purchase of ERs Emission Reductions (ERs) ER Baseline emissions Project emissions Baseline Scenario ProjectScenario Carbon trade Industrialized country with an emissions cap Domestic action Purchase of allowances $ Emissions target $ Developing country/economy in transition benefits from technology and financial flows

  24. Develop an overall program framework which the Executive Board approves PoA CPA CPA CPA CPA Program of activities One POA & Many CPAs : One Methodology Develop subsequent mini projects or program activities with streamlined approval by the executive Board

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